A CRIPPLING shortage of rental cars could cost the Irish tourism industry more than a quarter of a billion euro this year, according to a new report.
The inadequacy of the rental fleet, which has contracted from about 30,000 cars in 2006 to 17,500 last year to 12,500 this year, is having a negative impact on business for airlines, hotels and tour operators, and could result in serial cancellations.
It is also said to be undermining the value available in access transport and accommodation, as well the Irish tourism product as a whole, which the Government had flagged as an area that could drive the State’s economic recovery.
The shortage is being driven by changes to a VRT rebate system, which turned car dealers away from doing short-term deals with rental companies, and could be exacerbated by the new scrappage scheme as people are now more likely to purchase new rather than ex-rental vehicles.
The report, Car Rental Fleet Shortages Tourism in 2010, says the problem could significantly delay a recovery in tourism.
The sector struggled greatly last year with 6.9 million visits to Ireland, an 11.6 per cent drop on 2008 and the lowest number since 2005.
Compiled by a number of tourism industry bodies, including the Car Rental Council of Ireland, the Irish Tourist Industry Confederation (ITIC) and the Irish Tour Operators Association (ITOA), the report says the number of vehicles available for rental here is about 10,000 below its expected level and half the size it needs to be to prevent rental rates spiking.
It says that unless the problem is addressed immediately the industry will lose “substantial business” this year of up to €260 million and that it could do “lasting damage” to Ireland’s reputation as a tourist destination and benefit rival tourism markets.
Estimates suggest one-third of all overseas holidaymakers hire a car while in Ireland, which rises to 42 per cent for North Americans, who also face problems with a shortage of cars with automatic transmission.
“Without a satisfactory resolution to this problem serious damage will be done to Irish tourism during the peak season,” said ITIC chief executive Eamonn McKeon.
“It’s when people make money so it’s critical we get it right. If we can’t, it will lead to cancellations for airlines, hotels and of holidays in general.”
A spokesman for Aer Lingus said a further drop in rental car supply would be a major problem.
“This is a matter of great concern to us as spiralling prices and the severe lack of supply is a further inhibitor to our ability to bring passengers into Ireland,” he said.
“We believe it is now critical that this situation is addressed as a matter or urgency and all possible is done so that we do not see a recurrence of the issues faced in 2009 and any possible deterioration into 2010 and beyond.”
Stephen Cotter, of CIÉ Tours, said travel agents would lose confidence in sending clients to Ireland unless the problem is addressed as a matter of urgency.
“We don’t have bookings that have been declined as of yet but after Easter we would start seeing the small pool of cars used up and its only from then on we will see direct cancellation as a result.”
Mr Cotter said the cost of renting a small manual car for a week in Ireland was about €400, compared to €210 in Scotland, a competitor country, and could rise as high as €700 this year.
Paul Redmond, of the Car Rental Council of Ireland, said the shortage existed last year but only became serious in July and August because there was still enough 2007 and 2008 cars in the fleet.
“The problem started in 2008 with a change to the VRT relief system which left a lot of dealers with cars that were devalued and depreciated.”
Mr Redmond said dealers and financiers lost faith in the old system of selling cars and buying them back having been rented and that in 2009 only 6,600 new cars were added to the fleet, compared to 20,000 in 2007.
He said that, in order to address the shortage, the Government must suspend the phasing out of the VRT rebate and allow cars used for rental purposes in the summer months to fall under the scrappage scheme.
